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Meaning
Plastic money refers to credit cards, we use them whenever we want and pay later (with interest, of course). It makes
it too easy for us to buy things we normally could not afford, which makes it easier to get into debt.
Definition
A slang phrase for credit cards, especially when such cards used to make purchases. The “plastic” portion of this
term refers to the plastic construction of credit cards, as opposed to paper and metal currency. The “money” portion
is an erroneous reference to credit cards as a form of money, which they are not. Although credit cards do facilitate
transactions, because they are a liability rather than an asset, they are not money and not part of the economy’s
money supply.
Through questionnaire:-
Information to find out the investment potential and goal was found out through questionnaires.
Through Tele-Calling:-
Information was also taken through telephone calls.
Definition:-
The credit card can be defined as “A small plastic card that allows its holder to buy goods and services on credit and
to pay at fixed intervals through the card issuing agency.
Meaning:-
A credit card is a card or mechanism which enables the cardholder to purchase goods, travels and dine in a hotel
without making immediate payments. The holders can use the cards to get credit from banks up to 45days.
The credit card relieves the consumers from the botheration of carrying cash and ensures safety. It is a convenience
of extended credit without formality. This credit card is a passport to, “safety, convenience, prestige, and credit.
A credit card is an integral part of banks major services these days. The credit card provides the following
advantages to the bank. The system provides an opportunity for the bank to attract new potential customers.
To get new customers the bank has to employee special trained staff. This gives the bank an opportunity to find
the latent talent from among existing staff that would have been otherwise wasted.
The most important function of a credit card, however, is simply to yield a direct profit for the bank. There is a
scope and a potential for better profitability out of income/ commission earned from the traders turn over.
This also provides additional customer services to existing clients. It enhances customer satisfaction.
More use by the cardholder and consequently the growth of banking habits in general.
The better network of cardholders and increased use of cards means higher popularity and image of the bank
Savings of expense on cash holdings, i.e. stationery, printing, and
manpower to handle clearing transactions while considerably is reduced.
Also, check out this project on Cashless Economy CBSE Board. It will provide you all the valuable data related to
cashless economies like credit cards, debit cards, bank transfer etc
(B) Benefits to Card Holder
He can purchase goods and services at a large number of outlets without cash or cheque. The card is useful in an
emergency and can save embarrassment.
The risk factor for carrying and storing cash is avoided. It is convenient for him to carry a credit card and he has
trouble-free travel and may purchase without carrying cash or cheque.
Months purchases can be settled with a single remittance, thus, tending to reduce bank and handling charges.
The cardholder has the period of free credit usually between 30-50 days of purchase.
Cash can usually be obtained with the card, either on card account or by using it as identification when encasings
a cheque at the bank.
Availing credit with minimum formality.
The credit card saves trouble and paperwork to the traveling businessman.
(C) Benefits to the Merchant Establishment
Some credit card transactions take longer time than cash transactions because of various formalities.
The customer tends to overspend out of immense happiness.
Discounts and rebates can rarely be obtained.
The cardholder is responsible for charges due to loss or theft of the card and the bank may not be a party for loss
due to fraud or collusion of staff, etc
Customers may be denied a cash discount for payment through the card.
It might lead to spending habits and cardholders may end up in big debts
Avoid the entire cost and security problem involved in handling cash.
Losses to bad debts and reduced additional liquidity is
It also allows him to delegate spending power to add on members
A credit card is considered as a status symbol.
Issuer:
The financial institution or other organization that issued the credit card to the cardholder.
The flow of information and money between these parties — always through the card associations — is known as
the interchange, and it consists of a few steps:
1. Authorization:–
The cardholder pays for the purchase and the merchant submits the transaction to the acquirer. The acquirer
verifies with the issuer — almost instantly — that the card number and transaction amount are both valid, and
then processes the transaction for the cardholder.
2. Batching:–After the transaction is authorized it is then stored in a batch, which the merchant sends to the acquirer
later to receive payment (usually at the end of the day).
3. Clearing and settlement:-
The acquirer sends the transactions in the batch through the card association, which debits the issuers for payment
and credits the acquirer. In effect, the issuers pay the acquirer for the transactions.
4. Funding:-
Once the acquirer has been paid, the merchant receives payment. The amount the merchant receives is equal to
the transaction amount minus the discount rate, which is the fee the merchant pays the acquirer for processing the
transaction. The entire process, from authorization to funding, usually takes about 3 days. However, Merchant
Card Processing from some banks and financial institutions can offer next-day deposits to their customers with a
business checking account. In the event of a chargeback (when there’s an error in processing the transaction or
the cardholder disputes the transaction), the issuer returns the transaction to the acquirer for resolution. The
acquirer then forwards the chargeback to the merchant, who must either accept the chargeback or contest it.
CONCLUSION:
In the last two years, spending pattern through plastic money has changed drastically. Travelling, dining, and
jewelry are the top three purchases that Indian makes through credit cards. Two years ago, it was jewelry and
apparel purchases that formed the largest chunk of purchases through plastic money. Fuel accounts for a very small
portion of credit card purchases as these are largely paid through debit cards.
Consumers were not only more open to the possibility of owning a financial card but were also more than willing to
use their cards to settle dues. The status symbol aspect of owning and using cards too played its part in bringing
about such robust growth over the space of a single year. Debit cards, in particular, proved immensely popular.
According to projections for the 2003-2008 period, the number of financial cards in circulation will register a
compounded annual growth rate of nearly 51 percent sp the satisfaction of consumers has also increased. There are
many ethical issues and challenges for plastic money issuing banks/ companies. Security relating to the card should
be the first priority for each bank/company.
Consumers are preferring these cards mostly for shopping online E-commerce has given a better way to use plastic
money.
At last, it is concluded that plastic money has a very bright future in the coming years because of the increasing
trend of E-commerce.
BIBLIOGRAPHY / REFERENCE :
Kothari C.R, “Research Methodology: Research and Techniques”; Vishwa Prakashan, New Delhi, 4 thedition.
E.gordan and Natrajan, Financial Services, Himalaya Publishing House, Mumbai. 5 th edition.
College Student using the Credit Card
Smart card based Electronics Commerce characteristics and Roles
Credit card and Debit cards: What new? Where to?
Competition and Credit and Debit card Interchange Fees
Theory of Credit card Networks: A survey of Literature
An introduction to the economics of payment card networks
Credit card crisis in South Korea
Ethical Issues and Challenges
www.rba.gov.au
www.federalreserve.gov
www.direct.gov.uk
www.paypal.com
www.google.com
Types of Plastic Cards
There are basically two kinds of Plastic cards which are commonly
used to buy goods and services : Debit Card and Credit Card
Debit Card
Debit card is linked to the account of the cardholder i.e one who owns
the cards. They are usually issued by Banks and financial institutions.
When ones use a debit card the money is immediately deducted
directly from one’s account associated with the card. One can buy
things as long as there is money in account. A debit card is a way to
“pay now” Say you have Rs 10,000 in your account. The amount you
can spend, or withdraw, through your card cannot exceed this limit.
Credit Card
Credit Card is a small plastic card that is issued by financial
institutions such as banks. As the name Credit when one buys using
credit card, one is buying by taking loan. One needs to pay back
later(there are no free lunches in life!). There is a limit to which one
can buy on a credit card. So, even if you have only Rs 10,000 in your
account but your credit limit is Rs 50,000, you are free to spend up to
Rs 50,000. You could also have Rs 1,00,000 in your account, but your
credit limit is only Rs 50,000. You need to repay the amount bought on
credit by a due date.